What is the Law to Pay Taxes? A complete Guide

Photo of author

By Rebecca

The law to pay taxes refers to the legal requirement for individuals, businesses, and other entities to pay taxes on their income, property, or other taxable assets or activities. The government enforces this law to generate revenue to fund public services and programs such as education, healthcare, and infrastructure.

In some countries, including the United States, the law to pay taxes is established through the tax code, which outlines the various types of taxes that individuals and entities must pay and the specific rules and regulations governing those taxes. Seven federal income tax categories with rates of 10%, 12%, 22%, 24%, 32%, 35%, and 37% presently exist in the United States. 

Failure to comply with the law to pay taxes can result in penalties, fines, and legal action by the government. It is important for individuals and businesses to understand their tax obligations and to comply with the law to avoid legal and financial consequences. Many countries have resources to help taxpayers understand their tax obligations and file them correctly.

Types of Taxes

Individuals and businesses have to pay many different types of taxes. Understanding the different types of taxes is important for compliance with tax laws and effective tax planning. Here are some common types of taxes:

1. Income Tax

This type of tax is the government’s largest revenue source in most countries, including the United States. Income tax is typically based on a progressive tax system, meaning the tax rate increases as income increases. Taxpayers must file an income tax return each year to report their income and calculate the amount of tax owed.

2. Property Tax

Property tax is a tax on the property’s value, such as real estate and personal property. The tax is usually assessed by local governments and is based on the property’s value. Property taxes fund local government services such as schools, roads, and public safety.

3. Sales Tax

A sales tax is a tax on the sale of goods and services. It is typically a percentage of the sale price and is collected by the seller at the time of the transaction. State and local governments often use sales tax to fund public services and programs.

4. Excise Tax

An excise tax is on specific goods and services, such as gasoline, alcohol, tobacco, and certain luxury items. Excise taxes are often used to discourage these goods’ consumption and generate revenue for the government.

5. Payroll Tax

Payroll tax is a tax on wages and salaries employers and employees pay. It funds Social Security and Medicare programs in the United States. Payroll taxes are typically paid by both the employer and employee, with the employer withholding the tax from the employee’s paycheck and remitting it to the government.

6. Estate Tax

The estate tax is on the transfer of assets from a deceased person’s estate to their heirs. The tax is based on the value of the assets and is typically paid by the estate before distribution to heirs. An estate tax is often used to generate government revenue and prevent the concentration of wealth.

7. VAT or Value Added Tax 

It is a consumption tax added to the price of goods and services at each stage of production or distribution. It is a tax on the value of a product or service at each stage of production or distribution, from the raw materials to the final product or service. VAT is common in many countries, including the European Union, Canada, and Australia.

The amount of VAT added to the price of a product or service varies depending on the tax rate set by the government. In some countries, different VAT rates may apply to different types of products or services. For example, in the UK, there are three different VAT rates: standard rate (20%), reduced rate (5%), and zero rates (0%).

Tax Filing Requirements 

It is important to understand and meet tax filing requirements to avoid penalties, interest, and other legal action by the government. Taxpayers unable to pay their taxes in full may be eligible for payment plans or other relief options. Still, it is important to communicate with the government and seek assistance as soon as possible to avoid further penalties and consequences.

  • Filing requirements vary depending on income, filing status, and other factors.
  • Most individuals must file a tax return if their income exceeds a certain threshold.
  • Businesses and self-employed individuals must file taxes annually and make quarterly estimated tax payments.
  • Failure to file taxes or pay taxes owed can result in penalties, interest, and legal action by the government.
  • Taxpayers unable to pay their taxes in full may be eligible for payment plans or other relief options.

Tax filing requirements are generally based on income, filing status, and other factors. Most individuals must file a tax return if their income is above a certain threshold, which varies based on age, filing status, and other deductions.

Tax Payment Requirements:

In the United States, taxes are a necessary part of life for most individuals and businesses. Tax payment requirements vary based on income level, type of income, and residency status. 

How to pay taxes?

The most common way to pay taxes is to file an annual tax return with the Internal Revenue Service (IRS) and pay any taxes owed. The due date for filing tax returns is typically April 15th each year unless it falls on a weekend. It is the next business day.

Individuals can file taxes electronically using tax software or send a paper tax return to the IRS. Payment options include:

  • Sending a check or money order with the tax return.
  • Making a payment online through the IRS website.
  • Setting up a payment plan with IRS.

 Depending on their entity type, they may also have different tax payment requirements (sole proprietorship, partnership, corporation, etc.). Business owners should consult a tax professional to understand their tax payment requirements.

Estimated tax payments:

Individuals and businesses that do not have taxes withheld from their income may require to make estimated tax payments throughout the year. It can include self-employed individuals, independent contractors, and small business owners.

Estimated tax payments m quarterly and based on the income earned during that quarter. The due dates for estimated tax payments are April 15th, June 15th, September 15th, and January 15th of the following year.

Failure to make estimated tax payments can result in penalties and interest charges.

Late payment penalties and interest:

Individuals and businesses who fail to pay their taxes by the due date may be subject to late payment penalties and interest charges. The penalty for late payment is typically 0.5% of the unpaid monthly taxes, up to a maximum of 25% of the total tax owed.


Law to pay taxes is an essential aspect of modern society and use to fund important government services and programs. There are various types of taxes, including sales tax, income tax, payroll tax, and property tax, each with its own rules and regulations. Tax requirements vary based on income level, residency status, and business entity type.

Also Read: Lawyers in Tax: Who and What Are They?